Questions:
I’ve finally come around to the index/passive style of investing and just want to make certain I’m on the right path. Do you see any issues with my current set-up? Is there something I should tweak to be better diversified? I appreciate any & all replies.

Take care.

Last edited by Placenshow on Mon Oct 15, 2012 12:41 pm, edited 1 time in total.

It's hard to tell without changing the percentages to show 100% of your portfolio total instead of 100% of each account.

I would say you are DRASTICALLY overweighting mid and small cap stocks with your current set up. i would put more in the total market index and less in the extended market index (you may have chosen this route for a reason however.)

I would also add the following:

1.) your next step should be trying to up your savings rate if at all possible.I know it can be tough but you should look for ways to cut if your in the 25% bracket and your only debt is a reasonable mortgage.

2.) Don't forget to diversify out of your 4% match in comapny stock if you have the ability too.

I also think your proposal looks good. I agree with the previous poster that you should make sure you understand your choices. If you do not have a compelling reason why you chose it, it may be difficult to stay the course.

I think an 80/20 AA is fine. Disclaimer: I am a few years older than you and I have an 80/20 AA.

Due to where our money is and for the ease of getting the allocation %'s lined up, I think we're going to use Spartan US Bond Index (FBIDX) instead of Vanguard Intermediate Bond (VBIIX). The ER is a wash.

Due to where our money is and for the ease of getting the allocation %'s lined up, I think we're going to use Spartan US Bond Index (FBIDX) instead of Vanguard Intermediate Bond (VBIIX). The ER is a wash.

One last question, with my Fidelity Spartan Total Stock Market Index fund holding ~3.5% in real estate stocks, is it wise to also have a REIT fund? Would I be better off eliminating the REIT fund and throwing the extra 5% to Fidelity Spartan Total Stock Market Index fund or am I being a bit too picky?

1) Remove extended market. Combine with Total US Stock Market.
2) Possibly increase bonds a little considering your age.
3) 5% REIT is not that material and they are included in Total Stock. You could combine.

John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" |
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Disclosure: Three Fund Portfolio + U.S. & International REITs

You do not need the extended market fund. The stocks there are already included in the Total Stock Market fund. But if you wish to overweight mid and small caps, the ratio of TSM and extended market you posted last is not unreasonable. I would suggest that you not overweight mid and small caps unless you understand what that means and how it might increase your portfolio volatility.

As for the REIT, opinions vary considerably over this one as well. REIT stocks are already included in the TSM, but some people believe they are underweighted. Some people believe that having a little extra REIT is a good thing. This is a fairly minor decision. If you want super-simplicity, drop the REIT. If you want a little extra REIT, keep the REIT. Search the Wiki for information on Rick Ferri's "Core Four" portfolio (Total stock, total international, total bond, REIT).

I agree that only 20% bonds at 39 years old is getting near the max of reasonable. You might consider 25% for now, increasing more when you hit 45.

I don't think you are mis-interpreting the data. But you may not understand exactly what the data means.

The Total Stock Market fund represents the US stock market - which is roughly 70% large cap, 20% mid cap, and 10% small cap by definition. So, the exposure to mid and small caps is limited. But it is the exposure that actually exists in the market. "It is what it is" so to speak.

If you want more mid and small caps than the market holds, that's fine. But you should not stumble in that direction by accident or without realizing that mid and small cap stocks carry more risk. I'm not talking stupid crazy risk, just more risk than the market as a whole.

It sort of boils down to whether you want to invest in the market as it is or in some kind of custom blend that you make up for yourself.

Opinions vary on the TIPS question. Some people want TIPS from a young age, some only when nearing retirement. Some don't want TIPS at all. There is no one "right answer" to this one so just do whatever feels right to you.

My 401k match (4%) is in company stock. Is it acceptable in the Boglehead world to keep a small % of company stock as part of your overall portfolio or is the recommendation to sell and spread the $$ across my core-four family of funds? Right now, 5% of my overall portfolio is tied up in company stock.

If you have the option to get rid of your company stock and put it into your core-4 plan, then do it. Here are my reasons:

1. Holding a single stock is assuming more risk than what you will be compensated for. If risk can be diversified away (e.g., TSM index), then you will not be compensated with higher returns for the higher risk.

2. You already have your job with the company. If the company falls apart, you could lose your job and money. Not good.

3. I think there is a risk that you may get deluded by all the hype about your company that you receive at work and not make sound judgment about the stock.

I would like to be shown the exponentially different risk factor according to my definition (or any other for that matter)! Conversely, I just showed you about a weighted 1.5% ANNUAL increase in return for the largest allocation in your AA (domestic Stocks).

You are now proposing to overweigh Small Cap Growth. Yes, you are taking undue risk. You will not be compensated properly for that fund - do you have Small Cap Value available in your selection menu? Think of small cap growth as having to pay the equivalent of $5 for $1 dollar of value (the market is estimating infinite growth potential) - if those companies fail to perform, your $5 investment could become $2.50 overnight. Now, think of Small Cap Value as paying $1.20 or less than $1 for $1 of value, if small value delivers a positive earnings surprise, it can become worth $2 or more, which would you prefer? If no small cap value, then I would just stick with Total Stock Market Index.